Regulating Trading Practices

Andreas M. Fleckner

Max Planck Institute for Comparative and International Private Law

December 6, 2014

Oxford University Press, The Oxford Handbook of Financial Regulation, Forthcoming

High-frequency trading, dark pools, front-running, phantom orders, short selling — the way securities are traded ranks high among today’s regulatory challenges. Thanks to a steady stream of news reports, investor complaints and public investigations, it has become commonplace, both in financial and academic circles, to call for the government to intervene and impose order. The regulation of trading practices, one of the oldest roots of securities law and still a regulatory mystery to many people, is suddenly the talk of the town. From a historical and comparative perspective, however, many of the recent developments look less dramatic than some observers believe. This is the quintessence of the present chapter. It explains how today’s regulatory regime evolved, identifies the key rationale for governments to intervene, and analyzes the rules, regulators and techniques of the world’s leading jurisdictions. The chapter’s central argument is that governments should focus on the price formation process and ensure that it is purely market-driven. Local regulators and self-regulatory organizations will take care of the rest.

Number of Pages in PDF File: 52

Keywords: exchanges, securities trading, standardization, self-regulation, state intervention, securities regulation, price formation, price discovery, market efficiency, financial stability, investor protection, front-running, algorithmic trading, high-frequency trading, short selling, market fragmentation

JEL Classification: D4, D53, F3, G1, G18, G2, G23, G24, G28, H1, K2, K22, L1, L5, N2, N20, N4, N40

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Date posted: August 8, 2014 ; Last revised: December 15, 2014

Suggested Citation

Fleckner, Andreas M., Regulating Trading Practices (December 6, 2014). Oxford University Press, The Oxford Handbook of Financial Regulation, Forthcoming. Available at SSRN: http://ssrn.com/abstract=2476950

Contact Information

Andreas M. Fleckner (Contact Author)
Max Planck Institute for Comparative and International Private Law ( email )
Mittelweg 187
D-20148 Hamburg
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